Echoes of the Past: State Ownership Imprints on Innovation

Abstract

The imprint literature has concentrated on the influence of entrepreneurs and political leaders in the start-up phase of organizations on long-term corporate strategy, but little attention has been paid to the enduring impact of the initial shareholders as an important group. We developed a framework in which state ownership imprint, which was left in the start-up stage of the focal firm, have a long-lasting impact on its subsequent innovation strategy through two culture and value mechanism, the bluntness to market competition and the preference for risk aversion. Using a panel data analysis on 925 Chinese private firms from 2008 to 2020, we found that the state ownership imprint decreases the innovation performance of the firms. We further propose that the institutional development in which the firm is embedded weakens the inhibitory effect of the state ownership imprint on innovation by weakening the firm's bluntness to market competition, while the religious cultural environment reinforces the relationship between state ownership imprint and innovation by strengthening firms' risk-averse preferences. Our study contributes to the innovation literature and imprint theory.